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Magnetation celebrates construction of fourth Iron Range plant

Magnetation President Matt Lehtinen talks about the work at the firm’s Plant 4 (background), under construction near Coleraine. (Steve Kuchera / skuchera@duluthnews.com)1 / 4

A worker walks by a crane inside Magnetation Plant 2 near Bovey on Thursday afternoon. Beyond the crane are two of the plant’s separators, which use magnets to extract iron ore from what was waste in early mining processes. (Steve Kuchera / skuchera@duluthnews.com)2 / 4

A front-end loader dumps a bucketful of Magnetation’s finished concentrated iron into a truck outside of the company’s Plant 2. A second truck was being loaded at the same time inside the plant. The trucks take the iron ore to a landing, where it is loaded into railroad cars. (Steve Kuchera / skuchera@duluthnews.com)3 / 4

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BOVEY — Matt Lehtinen watched the black iron ore concentrate roll off the end of the conveyor belt, tilted his hard hat back a bit and smiled.

“This is our black gold,” Lehtinen yelled.

Lehtinen, the president of upstart iron ore recovery company Magnetation, had to yell to be heard through earplugs and the din of the company’s plant No. 2 machinery operating here on the western Mesabi Iron Range. The hulking plant uses giant magnets to separate a valuable, 65 percent rich iron ore concentrate from waste rock.

Plant No. 2 is impressive enough. A constant stream of big, side-dump trucks hauling in unprocessed iron ore waste from a century-old “red ore” mine unloads on one end while other trucks haul away processed concentrate from the other end.

But just down the road, high on a hill above Coleraine, Magnetation is building plant No. 4, double the size of the company’s existing facilities. It will be churning out iron ore concentrate in about eight months, about 2 million tons per year, headed to an Indiana plant to be baked into pellets that then go on to feed eastern U.S. steel mills.

The $155 million project, where hundreds of construction workers were busy Thursday, will permanently employ about 180 people. When plant No. 4 opens next year, Magnetation will have more than 520 employees, about 400 of whom will be on the Range.

“We’re growing at a pretty incredible rate,” said Lehtinen, noting the company opened its first plant in 2009.

Magnetation on Thursday held an open house to celebrate its progress, with local officials, investors, media and others attending. Gov. Mark Dayton proclaimed May 22 as “Red Ore Renaissance Day” in Minnesota, praising Magnetation’s investment, entrepreneurship and job creation while recycling leftovers from old mining efforts.

Two of the company’s plants, in Keewatin and Bovey, produce concentrate that Magnetation exports, much of it to a Mexican steel mill. A third plant, in Chisholm, is majority owned by Steel Dynamic’s Mesabi Nugget and supplies the iron nugget plant near Hoyt Lakes with its raw material.

Plant No. 4 will send all of its product to Magnetation’s pellet plant now under construction near Reynolds, Ind., a joint operation with steel giant AK Steel.

“We’ll actually be taking some (concentrate) from each of the plants to supply the Reynolds pellet plant,” Lehtinen said.

When plant No. 4 is running, the company’s combined operations will be producing about 4 million tons of concentrate per year, on par with Minnesota’s smaller taconite iron ore operations.

But Lehtinen said that the company has access to enough ore and enough room to expand to produce 7-8 million tons per year. That would make the upstart ore recycling company the state’s second-largest producer of iron ore, behind only U.S. Steel’s Minntac operations.

“That’s probably a ways down the road. And we’d need to make additional investments to get there. But that’s where we are aiming,” Lehtinen said. “We have the resources to grow that much.”

And while Iron Range officials still lament Magnetation’s decision to build its $300 million pellet plant and its 120 jobs in Indiana rather than Minnesota, the Grand Rapids-based company clearly continues to expand at home.

The stuff Magnetation “recycles” from old iron operations using giant magnets was considered of little or no value until technology developed to pull high-grade hematite out of waste rock. Piles of the stuff, often located in tailings basins from past operations, are found across the Mesabi Iron Range.

Magnetation’s efforts so far have focused on the western Mesabi Range, where natural ore-washing plants were more common in the early 1900s and where larger, now-dry piles of the leftover ore are sitting. Around plant No. 4 alone, Lehtinen said about eight or nine years’ worth of high-grade iron oxide is lying in piles and tailings basins, waiting to be recovered.

When the old mine “waste” runs out, Magnetation has the rights to mine natural red ore from the old Canisteo pit, where company officials say 100 years of natural ore reserves remain.

While Magnetation perfected the proprietary technology that pulls the ore away from the waste, it was rising global iron ore prices that made the idea profitable. Global prices rose from about $50 per ton a decade ago to as high as $190 per ton in 2011.

That price has now dropped to about $100 per ton as global iron ore and steel supply exceeds demand. But that’s a price at which Lehtinen said the company still can make a handsome profit recycling ore. That’s in large part because the company has much lower overhead than a traditional mining and processing operation.

“Most of the mining work was done for us by mining companies 100 years ago,” Lehtinen said.

State Rep. Tom Anzelc, DFL-Balsam, who represents Itasca County where Magnetation is focusing its operations, said the company has exceeded his expectations. The company has grown faster than even supporters imagined when state agencies loaned the startup company $5.5 million. Magnetation paid the loan back in 2012, years before it was due.

“This is a real, true-to-life, Iron Range mining success story,” Anzelc said. “These are Iron Range people who know mining and they have taken this crazy idea and made it into a reality. I really think it can be part of the rebirth of the western Mesabi Iron Range.”

Anzelc was an outspoken critic of Magnetation’s decision to build its pellet plant in Indiana and not Minnesota. But he concedes that decision may have been influenced by AK Steel, Magnetation’s partner. And without that partnership, Plant No. 4 would never have been built.

“In the end, they are creating more jobs on the Iron Range and expanding on the Iron Range, and that’s what matters,” Anzelc said.

Having AK Steel as a partner and not just a buyer helps buffer Magnetation from the ups and downs of the global spot market for iron ore. Magnetation still holds controlling interest in all of its operations.

“It’s been a good relationship,” Lehtinen said. “It’s allowed us to create a lot of jobs on the Iron Range, to grow much more than we could have on our own.”